Annual Report • Feb 2, 2023
Annual Report
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| Amounts in NOK million | Note | 2022 | 2021 | 2022 | 2021 |
|---|---|---|---|---|---|
| Operating revenues | 2 | 1,770 | 1,446 | 6,881 | 5,805 |
| EBITDA1 | 364 | 263 | 1,643 | 1,372 | |
| Operating profit | 228 | 156 | 1,186 | 952 | |
| Profit/loss before taxes | 2 | 210 | 132 | 1,118 | 873 |
| Earnings per share (NOK) | 1.85 | 1.02 | 8.95 | 6.95 | |
| Net interest-bearing debt1 | 11 | 1,836 | 1,417 | 1,836 | 1,417 |
| Equity ratio1 (%) |
54.8 | 60.1 | 54.8 | 60.1 | |
| Leverage ratio1 | 1.12 | 1.03 | 1.12 | 1.03 | |
| Return on capital employed1 (%) |
18.1 | 16.1 | 18.1 | 16.1 |
Alternative performance measure, see page 23 for definition.
Borregaard's operating revenues reached NOK 1,770 million (NOK 1,446 million)2 in the 4th quarter of 2022. EBITDA1 increased to NOK 364 million (NOK 263 million). BioMaterials and Fine Chemicals had significant result improvements while BioSolutions had a decrease. The net currency impact on EBITDA1 was positive compared with the 4th quarter of 2021.
Increased sales prices in addition to a higher volume and a favourable product mix were the main reasons for the EBITDA1 improvement in BioMaterials. The result improvement in Fine Chemicals was due to increased sales prices and a higher bioethanol sales volume. Reduced margin and volume for traded vanillin products were the main reasons for the EBITDA1 decrease in BioSolutions. Cost increases affected all business areas.
Other income and expenses1 were NOK -20 million in the 4th quarter of 2022. This was due to an accrual for precautionary measures related to ground conditions at the site in Norway.
Operating profit reached NOK 228 million (NOK 156 million). Net financial items were NOK -18 million (NOK -24 million). Profit before tax was NOK 210 million (NOK 132 million). Tax expense of NOK -47 million (NOK -39 million) gave a tax rate of 22% (30%) in the quarter.
Earnings per share were NOK 1.85 (NOK 1.02).
Cash flow from operating activities was NOK 313 million (NOK 356 million). The decline was mainly due to a less favourable development in net working capital compared with the 4th quarter of 2021, partly offset by the positive cash effect of an increased EBITDA1 .
Borregaard's operating revenues increased to NOK 6,881 million (NOK 5,805 million) in 2022. EBITDA1 increased to an all-time high of NOK 1,643 million (NOK 1,372 million). The result improved in all business areas. The net currency impact on EBITDA1 was positive.
In BioSolutions and BioMaterials, higher sales prices and an improved product mix were the main reasons for the EBITDA1 increase. In Fine Chemicals, the result improvement was due to increased sales prices and a higher bioethanol sales volume. Substantial cost increases affected all business areas.
Other income and expenses1 were NOK -8 million in 2022. NOK -20 million was an accrual for precautionary measures related to ground conditions at the site in Norway and NOK 12 million was mainly related to sale of assets in the closed lignin operation in South Africa.
Operating profit was NOK 1,186 million (NOK 952 million). Net financial items amounted to NOK -68 million (NOK -79 million). Profit before tax was NOK 1,118 million (NOK 873 million). Tax expense was NOK -267 million (NOK -213 million) giving a tax rate of 24% (24%).
Earnings per share were NOK 8.95 (NOK 6.95). Return on capital employed1 was 18.1% (16.1%), well above the targeted level of minimum 15% pre-tax.
In 2022, cash flow from operating activities was NOK 735 million (NOK 1,431 million). The cash flow was negatively affected by a significant increase in net working capital. This increase was due to higher inventory values related to volume and cost increases, and higher sales prices, affecting accounts receivable.
Alternative performance measure, see page 23 for definition.
Figures in parentheses are for the corresponding period in the previous year.
| 1.10 - 31.12 | 1.1 - 31.12 | |||
|---|---|---|---|---|
| Amounts in NOK million | 2022 | 2021 | 2022 | 2021 |
| Operating revenues | 997 | 934 | 4,050 | 3,469 |
| EBITDA1 | 159 | 214 | 986 | 942 |
| EBITDA margin1 (%) |
15.9 | 22.9 | 24.3 | 27.2 |
BioSolutions' operating revenues reached NOK 997 million (NOK 934 million). EBITDA1 was NOK 159 million (NOK 214 million).
The EBITDA1 decrease was mainly due to reduced margin and volume for traded vanillin products. Increased global supply and a significant price decline for synthetic vanillin and ethyl vanillin affected Borregaard's sales volumes and margins for these traded products negatively. Deliveries of wood-based vanillin were strong in the quarter. For lignin-based biopolymers, higher sales prices and positive currency effects offset increased costs.
The average price in sales currency was 7% higher than in the same quarter of 2021. There was a positive development for applications within oilfield chemicals and construction. In the 4th quarter of 2021, the average price in sales currency was positively influenced by extraordinarily high deliveries of wood-based vanillin.
The total sales volume was 6% lower than in the corresponding quarter in 2021 and in line with the outlook for the 4th quarter.
Sales price and sales volume include lignin-based biopolymers and biovanillin.
AVERAGE GROSS SALES PRICE3
AVERAGE GROSS SALES PRICE3
Alternative performance measure, see page 23 for definition.
BioSolutions' operating revenues reached NOK 4,050 million (NOK 3,469 million). EBITDA1 improved to NOK 986 million (NOK 942 million). Increased sales prices, positive net currency effects and a slightly improved product mix were the main reasons for the EBITDA1 improvement, partly offset by substantial cost increases.
Demand for lignin-based biopolymers was generally strong. The market introduction of the new woodbased vanillin capacity was on track in 2022. Demand for wood-based vanillin was partly influenced by a temporarily tight supply situation for synthetic vanillin and ethyl vanillin in the 1st half of 2022. Borregaard's trading of synthetic vanillin and ethyl vanillin peaked during this period with higher sales prices and margins. These markets weakened towards the end of 2022.
The average price in sales currency was 20% higher than in 2021 mainly due to price increases and optimisation of product mix.
Total sales volume was 9% lower than in 2021, mainly due to lower raw material supply in 2022 and sales from inventories in 2021. In addition, volumes were optimised based on value within all market segments.
| 1.10 - 31.12 | 1.1 - 31.12 | |||
|---|---|---|---|---|
| Amounts in NOK million | 2022 | 2021 | 2022 | 2021 |
| Operating revenues | 620 | 405 | 2,250 | 1,878 |
| EBITDA1 | 138 | 27 | 427 | 284 |
| EBITDA margin1 (%) |
22.3 | 6.7 | 19.0 | 15.1 |
Operating revenues in BioMaterials increased to NOK 620 million (NOK 405 million) in the 4th quarter. EBITDA1 reached NOK 138 million (NOK 27 million).
The significant EBITDA1 improvement was mainly due to increased sales prices. In addition, net currency effects, a higher volume and a favourable product mix contributed positively. The positive effects were partly offset by higher raw material and energy costs. The annual maintenance stop went according to plan and maintenance costs were lower than in the same quarter of 2021. Production output was significantly higher compared with the corresponding quarter in 2021, which was affected by an extended maintenance stop. Both sales volume and sales prices increased for cellulose fibrils compared to the corresponding quarter in 2021.
The average price in sales currency increased 39%, mainly as a result of price increases and surcharges for speciality cellulose. In total, demand was strong in the quarter. However, there was a slight slowdown in orders from the construction market for cellulose ethers.
Operating revenues in 2022 reached NOK 2,250 million (NOK 1,878 million). EBITDA1 increased to NOK 427 million (NOK 284 million).
The significant EBITDA1 improvement was due to increased sales prices, higher production and an improved product mix for speciality cellulose. These effects were partly offset by lower deliveries and increased energy and raw material costs. Both sales volume and prices increased for cellulose fibrils. Net currency effects were positive.
The average price in sales currency increased 28% due to price adjustments, surcharges and an improved product mix. The sales volume was significantly lower than in 2021, when sales volume exceeded production output due to a considerable inventory reduction. Inventories increased from a low level in 2021. Demand for speciality cellulose has been strong in 2022. However, there was a slight slowdown in orders from the construction market for cellulose ethers towards the end of the year.
Sales price and sales volume include speciality cellulose and cellulose fibrils.
AVERAGE GROSS SALES PRICE5
AVERAGE GROSS SALES PRICE5
Alternative performance measure, see page 23 for definition.
5 Average sales price is calculated using actual FX rates, excluding hedging impact.
6 Metric tonne.
| 1.10 - 31.12 | 1.1 - 31.12 | |||
|---|---|---|---|---|
| Amounts in NOK million | 2022 | 2021 | 2022 | 2021 |
| Operating revenues | 170 | 114 | 632 | 491 |
| EBITDA1 | 67 | 22 | 230 | 146 |
| EBITDA margin1 (%) |
39.4 | 19.3 | 36.4 | 29.7 |
Fine Chemicals' operating revenues reached NOK 170 million (NOK 114 million). EBITDA1 improved to NOK 67 million (NOK 22 million).
The significant EBITDA1 improvement was due to increased sales prices and a higher bioethanol sales volume, partly offset by increased costs.
The result for fine chemical intermediates improved due to increased sales prices and a high production output, partly offset by increased raw material costs. For bioethanol, both sales volume and sales prices were higher compared with the 4th quarter of 2021.
Operating revenues in Fine Chemicals increased to NOK 632 million (NOK 491 million). EBITDA1 reached NOK 230 million (NOK 146 million).
The improved EBITDA1 for bioethanol was due to increased sales prices and a higher sales volume, partly offset by increased costs. Bioethanol sales were mainly to biofuels. The result for fine chemical intermediates improved due to increased sales prices and a high production output, partly offset by increased costs. The net currency impact was positive.
Sales revenues include fine chemical intermediates and bioethanol.
Borregaard has a significant currency exposure which is hedged according to the company's hedging strategy. The impact of currency rate fluctuations will be delayed as a result of the currency hedging strategy. Compared with the 4th quarter of 2021, the net impact of foreign exchange on EBITDA1 , including hedging effects, was NOK 55 million. Hedging effects were NOK -34 million (NOK 6 million) in the quarter.
In 2022, the net impact of foreign exchange on EBITDA1 , including hedging effects, was NOK 195 million compared with 2021. Hedging effects were NOK -50 million (NOK -29 million).
Assuming currency rates as of 1 February 2023 (USD 9.97 and EUR 10.86) and based on currency exposure forecasts, Borregaard expects a net impact of foreign exchange on EBITDA1 of approximately NOK 50 million in the 1st quarter of 2023 and NOK 135 million for the full year of 2023, compared with the corresponding periods in 2022.
Cash flow from operating activities in the 4th quarter was NOK 313 million (NOK 356 million). The decline was mainly due to a less favourable development in net working capital compared with the 4th quarter of 2021, partly offset by the positive cash effect of an increased EBITDA1 .
Investments amounted to NOK 212 million (NOK 262 million). Expansion investments1 totalled NOK 40 million (NOK 72 million).
In 2022, cash flow from operating activities was NOK 735 million (NOK 1,431 million). The cash flow was negatively affected by a significant increase in net working capital. This was due to higher inventory values related to volume and cost increases, and higher sales prices affecting accounts receivable. The cash effect of an improved EBITDA1 was partly offset by higher tax payments compared with 2021.
Investments amounted to NOK 464 million (NOK 701 million). Replacement investments were NOK 359 million (NOK 398 million). Expansion investments1
totalled NOK 105 million (NOK 303 million), and were mainly related to specialisation projects within BioSolutions.
Dividend of NOK 499 million (NOK 249 million) was paid out in the 2nd quarter. The Group has sold and repurchased treasury shares with net proceeds of NOK -27 million (NOK -59 million). Realised effect of hedging of net investments in subsidiaries was NOK -79 million (NOK -14 million).
On 31 December 2022, the Group had net interestbearing debt1 totalling NOK 1,836 million (NOK 1,417 million), an increase of NOK 419 million from year-end 2021.
At the end of December, the Group was well capitalised with an equity ratio1 of 54.8% (60.1%) and a leverage ratio1 of 1.12 (1.03).
The Board of Directors of Borregaard ASA will propose an ordinary dividend for 2022 of NOK 3.25 (NOK 2.75) per share to the General Meeting, corresponding to 36% of net profit. Dividend payment is estimated at NOK 324 million. The exact amount will depend on the number of treasury shares held at the date of the General Meeting.
Environment, health and safety (EHS) are integral parts of Borregaard's business model.
Greenhouse gas emissions (GHG, scope 1 and 2) and emissions of organic material (COD) were slightly lower than in 2021. The total recordable injuries per million hours worked (TRIF, rolling 12 months) were 4.9 (3.5). There were no fatal or high consequence work-related injuries in 2022.
Sick leave increased to 4.3% (3.7%) mainly due to Covid-19 related absence.
The table below shows key sustainability measures and targets. Further details will be disclosed in the Sustainability and corporate responsibility chapter in Borregaard's 2022 Annual Report, which will be published 28 March 2023.
| 31.12.2022 | 31.12.2021 | Target 2022 | Long term (2030) |
|
|---|---|---|---|---|
| Greenhouse gas emissions (Scope 1 and 2, '000 tonnes)* | 215 | 218 | N/A | 42% reduction from 2020 |
| COD (organic material) in process water discharged (t/day) | 54 | 55 | 55 | 40 |
| Total recordable injuries per million hours worked, rolling 12 months (TRIF) | 4.9 | 3.5 | 0 | 0 |
| Sick leave % | 4.3 % | 3.7 % | 3.5 % | 3.0 % |
* Emission figures as of 31.12.2022 are based on best estimate at the time of reporting.
In the 4th quarter of 2022, Borregaard repurchased a total of 200,000 treasury shares at an average price of NOK 147.85 in a share buy-back programme. In addition, Borregaard repurchased 96,539 treasury shares at an average price of NOK 155.04 when share options were exercised.
During the 4th quarter, 95,555 share options were exercised at a strike price of NOK 65.95 per share and 10,000 share options were exercised at a strike price of NOK 70.30 per share. Total number of shares outstanding on 31 December 2022 was 100 million, including 434,553 treasury shares. Total number of shareholders was 8,248. Borregaard ASA's share price was NOK 152.00 at the end of 2022 compared with NOK 128.60 at the end of the 3rd quarter of 2022 and NOK 222.00 at the end of 2021.
Borregaard will invest NOK 230 million to cut CO2 emissions and increase energy flexibility at the biorefinery in Norway. This investment is part of the environmental investment plan of NOK 650-850 million for the period 2023 to 2025, announced at the Capital Markets Day in September 2022.
Once completed in the 1st half of 2024, this investment will allow for a 30,000 tonnes annual reduction of CO2
emissions by replacing liquified natural gas (LNG) with electricity and by improved energy efficiency. In addition to reduced emissions and enhanced energy efficiency, there is a significant cost reduction potential by removing absolute dependency on LNG and introducing more options to switch between alternative energy sources.
In 2023, the total sales volume for BioSolutions is forecast to be approximately 350,000 tonnes, depending on raw material supply and global economic development. Sales volume in the 1st quarter of 2023 is expected to be in line with the 4th quarter of 2022. The portfolio optimisation within biopolymer applications will continue. The market for synthetic vanillin and ethyl vanillin is expected to normalise in 2023.
For BioMaterials, the total sales volume is forecast to be higher than the production output. Sales volume of highly specialised grades is expected to be higher than in 2022. In the 1st quarter of 2023, the average price in sales currency is expected to be largely in line with the 4th quarter of 2022. Development in the construction market for cellulose ethers is the main uncertainty for 2023. However, other applications are expected to largely compensate for a potential slowdown in the construction market. Sales growth will continue for cellulose fibrils.
Sales volume and product mix for fine chemical intermediates are expected to improve in 2023. In bioethanol, sales prices are expected to increase whereas sales volume is forecast to be in line with the 2022 level. The market conditions for advanced biofuels are favourable in several European countries. Bioethanol sales are expected to be mainly into these markets in 2023.
Wood costs will increase 10-15% in the 1st half of 2023 compared with the 2nd half of 2022. In the 1st quarter of 2023, energy and other raw material costs are expected to be slightly lower compared with the 4th quarter of 2022. Energy spot prices will continue to represent the largest uncertainty. However, Borregaard will benefit from its ability to switch between electricity, LNG and light oil to minimise energy costs at the site in Norway.
Cost inflation and consequences of the war in Ukraine may impact the global economy and Borregaard's markets. Borregaard will continue to closely monitor cost inflation and market development and implement relevant measures if required.
Sarpsborg, 1 February 2023 The Board of Directors of Borregaard ASA
| 1.10 - 31.12 | 1.1 - 31.12 | ||||
|---|---|---|---|---|---|
| Amounts in NOK million | Note | 2022 | 2021 | 2022 | 2021 |
| Operating revenues | 2 | 1,770 | 1,446 | 6,881 | 5,805 |
| Operating expenses | -1,406 | -1,183 | -5,238 | -4,433 | |
| Depreciation property, plant and equipment | -114 | -106 | -444 | -416 | |
| Amortisation intangible assets | -2 | -1 | -5 | -4 | |
| Other income and expenses1 | 3 | -20 | - | -8 | - |
| Operating profit | 228 | 156 | 1,186 | 952 | |
| Financial items, net | 4 | -18 | -24 | -68 | -79 |
| Profit before taxes | 210 | 132 | 1,118 | 873 | |
| Income tax expense | 5 | -47 | -39 | -267 | -213 |
| Profit for the period | 163 | 93 | 851 | 660 | |
| Profit attributable to non-controlling interests | -21 | -9 | -41 | -32 | |
| Profit attributable to owners of the parent | 184 | 102 | 892 | 692 | |
| EBITDA1 | 364 | 263 | 1,643 | 1,372 |
| 1.10 - 31.12 | 1.1 - 31.12 | ||||
|---|---|---|---|---|---|
| Amounts in NOK | 2022 | 2021 | 2022 | 2021 | |
| Earnings per share (100 mill. shares) | 6 | 1.85 | 1.02 | 8.95 | 6.95 |
| Diluted earnings per share | 6 | 1.84 | 1.02 | 8.92 | 6.94 |
| 1.10 - 31.12 | 1.1 - 31.12 | ||||
|---|---|---|---|---|---|
| Amounts in NOK million | Note | 2022 | 2021 | 2022 | 2021 |
| Profit for the period | 163 | 93 | 851 | 660 | |
| Items not to be reclassified to P&L | - | - | - | - | |
| Actuarial gains and losses (after tax) | 1 | 55 | 1 | 55 | |
| Total | 1 | 55 | 1 | 55 | |
| Items to be reclassified to P&L | |||||
| Change in hedging-reserve after tax (cash flow) | 8 | 338 | 37 | -253 | 86 |
| Change in hedging-reserve after tax (net investment in subsidiaries) |
8 | 63 | - | -70 | -9 |
| Translation effects | -93 | 6 | 118 | 25 | |
| Total | 308 | 43 | -205 | 102 | |
| The Group's comprehensive income | 472 | 191 | 647 | 817 | |
| Comprehensive income non-controlling interests | -28 | -8 | -33 | -28 | |
| Comprehensive income owners of the parent | 500 | 199 | 680 | 845 |
| Amounts in NOK million | Note | 31.12.2022 | 31.12.2021 |
|---|---|---|---|
| Intangible assets | 13 | 82 | 89 |
| Property, plant and equipment | 13 | 4,371 | 4,191 |
| Right-of-use assets | 345 | 351 | |
| Other assets | 9 | 254 | 339 |
| Investments in joint venture/associate company | 4 | 142 | 173 |
| Non-current assets | 5,194 | 5,143 | |
| Inventories | 1,299 | 792 | |
| Receivables | 9 | 1,387 | 1,107 |
| Cash and cash deposits | 11 | 234 | 124 |
| Current assets | 2,920 | 2,023 | |
| Total assets | 8,114 | 7,166 | |
| Group equity | 10 | 4,394 | 4,222 |
| Non-controlling interests | 51 | 84 | |
| Equity | 4,445 | 4,306 | |
| Provisions and other liabilities | 295 | 257 | |
| Interest-bearing liabilities | 9, 11 | 1,370 | 1,320 |
| Non-current liabilities | 1,665 | 1,577 | |
| Interest-bearing liabilities | 9, 11 | 702 | 224 |
| Other current liabilities | 9 | 1,302 | 1,059 |
| Current liabilities | 2,004 | 1,283 | |
| Equity and liabilites | 8,114 | 7,166 | |
| Equity ratio1 | 54.8 % | 60.1 % |
| 1.1 - 31.12.2022 | 1.1 - 31.12.2021 | ||||||
|---|---|---|---|---|---|---|---|
| Amounts in NOK million | Note | Controlling interests |
Non controlling interests |
Total equity |
Controlling interests |
Non controlling interests |
Total equity |
| Equity 1 January | 4,222 | 84 | 4,306 | 3,668 | 110 | 3,778 | |
| Profit/loss for the period | 892 | -41 | 851 | 692 | -32 | 660 | |
| Items in Comprehensive Income | 8 | -212 | 8 | -204 | 153 | 4 | 157 |
| The Group's Comprehensive income | 8 | 680 | -33 | 647 | 845 | -28 | 817 |
| Paid dividend | -499 | - | -499 | -249 | - | -249 | |
| Buy-back of treasury shares | -68 | - | -68 | -118 | - | -118- | |
| Exercise of share options | 16 | - | 16 | 38 | - | 38 | |
| Reduced tax payable of exercised share options | 3 | - | 3 | - | - | - | |
| Shares to employees | 33 | - | 33 | 28 | - | 28 | |
| Option costs (share based payment) | 10 | - | 10 | 10 | - | 10 | |
| Transactions with non-controlling interests | - | - | - | - | 2 | 2 | |
| Equity at the end of the period | 4,394 | 51 | 4,445 | 4,222 | 84 | 4,306 |
| 1.10 - 31.12 | 1.1 - 31.12 | ||||
|---|---|---|---|---|---|
| Amounts in NOK million | Note | 2022 | 2021 | 2022 | 2021 |
| Profit before taxes | 210 | 132 | 1,118 | 873 | |
| Amortisation, depreciation and impairment charges | 116 | 107 | 449 | 420 | |
| Changes in net working capital, etc. | 55 | 174 | -658 | 256 | |
| Dividend/share of profit from JV & associate company | 4 | 3 | 6 | 34 | 6 |
| Taxes paid | -71 | -63 | -208 | -124 | |
| Cash flow from operating activities | 313 | 356 | 735 | 1,431 | |
| Investments property, plant and equipment and intangible assets * |
-212 | -227 | -464 | -556 | |
| Investment in associate company | 4 | - | -35 | - | -145 |
| Other capital transactions | 4 | 4 | 9 | 9 | |
| Cash flow from investing activities | -208 | -258 | -455 | -692 | |
| Dividends | - | - | -499 | -249 | |
| Proceeds from exercise of options/shares to employees | 10 | 7 | 4 | 41 | 59 |
| Buy-back of treasury shares | 7 | -45 | -7 | -68 | -118 |
| Gain/(loss) on hedges for net investments in subsidiaries | 77 | -25 | -79 | -14 | |
| Net paid to/from shareholders | 39 | -28 | -605 | -322 | |
| Proceeds from interest-bearing liabilities | 11 | - | - | 837 | 300 |
| Repayment from interest-bearing liabilities | 11 | -43 | -146 | -512 | -814 |
| Change in interest-bearing receivables/other liabilities | 11 | -41 | 4 | 78 | -1 |
| Change in net interest-bearing liabilities | -84 | -142 | 403 | -515 | |
| Cash flow from financing activities | -45 | -170 | -202 | -837 | |
| Change in cash and cash equivalents | 60 | -72 | 78 | -98 | |
| Cash and cash equivalents at beginning of period | 76 | 76 | 5 | 96 | |
| Change in cash and cash equivalents | 60 | -72 | 78 | -98 | |
| Currency effects cash and cash equivalents | -25 | 1 | 28 | 7 | |
| Cash and cash equivalents at the close of the period |
11 | 111 | 5 | 111 | 5 |
| *Investment by category | |||||
| Replacement investments | 172 | 190 | 359 | 398 | |
| Expansion investments1 including |
|||||
| investment in associate company | 40 | 72 | 105 | 303 | |
| Total investments including investment in associate company |
212 | 262 | 464 | 701 |
Borregaard ASA is incorporated and domiciled in Norway. The address of its registered office is Hjalmar Wessels vei 6, Sarpsborg.
These unaudited Interim Condensed Consolidated Financial Statements are prepared in accordance with IAS 34 Interim Financial Reporting. Borregaard ASA is the parent company of the Borregaard Group presented in these Interim Condensed Consolidated Financial Statements.
The same accounting principles and methods of calculation have been applied as in the Consolidated Financial Statements for 2021 for the Borregaard Group.
The same use of estimates has been applied as in the Consolidated Financial Statements for 2021.
| 1.10 - 31.12 | 1.1 - 31.12 | ||||
|---|---|---|---|---|---|
| Amounts in NOK million | 2022 | 2021 | 2022 | 2021 | |
| Borregaard | 1,770 | 1,446 | 6,881 | 5,805 | |
| BioSolutions | 997 | 934 | 4,050 | 3,469 | |
| BioMaterials | 620 | 405 | 2,250 | 1,878 | |
| Fine Chemicals | 170 | 114 | 632 | 491 | |
| Eliminations | -17 | -7 | -51 | -33 |
There is limited intercompany sales between the different segments and eliminations consist essentially of allocations from the corporate headquarter.
cont. next page
| 1.10 - 31.12 | 1.1 - 31.12 | |||
|---|---|---|---|---|
| Amounts in NOK million | 2022 | 2021 | 2022 | 2021 |
| Borregaard | 364 | 263 | 1,643 | 1,372 |
| BioSolutions | 159 | 214 | 986 | 942 |
| BioMaterials | 138 | 27 | 427 | 284 |
| Fine Chemicals | 67 | 22 | 230 | 146 |
| EBITDA1 | 364 | 263 | 1,643 | 1,372 |
|---|---|---|---|---|
| Depreciations and write downs | -114 | -106 | -444 | -416 |
| Amortisation intangible assets | -2 | -1 | -5 | -4 |
| Other income and expenses1 | -20 | - | -8 | - |
| Operating profit | 228 | 156 | 1,186 | 952 |
| Financial items, net | -18 | -24 | -68 | -79 |
| Profit before taxes | 210 | 132 | 1,118 | 873 |
| 1.10 - 31.12 | 1.1 - 31.12 | |||
|---|---|---|---|---|
| Amounts in NOK million | 2022 | 2021 | 2022 | 2021 |
| Borregaard | 1,742 | 1,424 | 6,776 | 5,715 |
| BioSolutions | 966 | 915 | 3,946 | 3,392 |
| BioMaterials | 608 | 398 | 2,205 | 1,840 |
| Fine Chemicals | 168 | 112 | 625 | 485 |
| Eliminations | - | -1 | - | -2 |
Operating revenues consist of sales revenues and other revenues such as commissions, revenues from waste received for incineration etc.
Other income and expenses1 was NOK -20 million in the 4th quarter of 2022. This was due to an accrual for precautionary measures related to ground conditions at the site in Norway. In the 2nd quarter of 2022, Other income and expenses1 of NOK 12 million was mainly related to sale of assets in the closed lignin operation in South Africa. The realised value was higher than the provision made in 2020.
| 1.10 - 31.12 | 1.1 - 31.12 | |||
|---|---|---|---|---|
| Amounts in NOK million | 2022 | 2021 | 2022 | 2021 |
| Net interest expenses | -26 | -13 | -76 | -59 |
| Currency gain/loss | 10 | -7 | 6 | -8 |
| Share of profit/-loss from an associate | - | -2 | -3 | -2 |
| Other financial items, net | -2 | -2 | 5 | -10 |
| Net financial items | -18 | -24 | -68 | -79 |
Borregaard holds 25% of the shares in Alginor ASA as of 31 December 2022. Other financial items, net includes changes in committed return on the Group's unfunded pension plan.
The tax rate of 23.9% (24.4%) for 2022 is a compilation of the tax rates in the various countries in which Borregaard operates and has taxable income. The corporate income tax rate in Norway is 22%.
In addition to the compilation of the tax rates in the various countries in which Borregaard operates and has taxable income, the income tax rate for the Group is also impacted by the following: LignoTech Florida is a limited liability company (LLC) which is taxed on the owners' hand. Profit before tax is 100% consolidated in the Borregaard
Group, whereas the tax expense is calculated based on Borregaard's 55% ownership. Consequently, profit attributable to non-controlling interests for LignoTech Florida (45%) is calculated on profit before tax. Share of profit after tax from the joint venture, LignoTech South Africa, and from the associated company, Alginor ASA, is accounted for as part of profit before tax (due to IFRS 11). There are carry forward losses in the Group which will not be recognised as deferred tax assets, and hence increase the Group's tax rate.
The share capital consists of 100 million shares. The company holds 434,553 treasury shares. As of 31 December 2022, there are 99,752,815 diluted shares
(99,742,686 as of 31 December 2021). Earnings per diluted share were NOK 1.84 in the 4th quarter (NOK 1.02 in the 4th quarter of 2021).
During the 4th quarter, 95,555 share options were exercised at a strike price of NOK 65.95 per share and 10,000 share options were exercised at a strike price of NOK 70.30 per share.
The Group Executive Management and other key employees hold a total of 1,196,500 stock options in five different share option programmes in Borregaard.
| Stock options | Issued 2018 | Issued 2019 | Issued 2020 | Issued 2021 | Issued 2022 |
|---|---|---|---|---|---|
| Number of stock options | 20,500 | 327,000 | 400,000 | 249,000 | 200,000 |
| Strike price (NOK)* | 65.95 | 70.30 | 94.60 | 175.70 | 223.75 |
| Vesting period | 3 years | 3 years | 3 years | 3 years | 3 years |
| Expiry date | 7 February 2023 | 6 February 2024 | 13 February 2025 | 16 February 2026 | 17 February 2027 |
* Strike prices as at 31 December 2022 have been adjusted for dividend paid since issuance of stock options.
The statement of comprehensive income shows changes in the value of hedging instruments, both cash flow hedges and hedges of net investments
in subsidiaries (hedging reserve). These figures are presented after tax.
| 31.12.2021 | |||
|---|---|---|---|
| Cash flow hedges |
Hedges of net investments in subsidiares |
Cash flow hedges |
Hedges of net investments in subsidiares |
| -33 | -65 | 39 | -45 |
| -116 | -196 | 137 | -126 |
| 31.12.2022 |
For financial instruments that are recognised at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation at the end of each reporting period.
The following measurement levels are used for determining the fair value of financial instruments:
• Level 3 — Valuation techniques (for which the lowest level input that is significant to the fair value measurement is unobservable)
There were no transfers from one level to another in the measurement hierarchy from 2021 to the 4th quarter of 2022. Borregaard has no items defined as level 1. The bond is determined as measurement level 3. The fair value of the bond is deemed to equal its book value.
Set out below is a comparison of the carrying amount and the fair value of financial instruments as of 31 December 2022:
| 31.12.2022 | 31.12.2021 | ||||
|---|---|---|---|---|---|
| Amounts in NOK million | Level | Carrying amount | Fair value | Carrying amount | Fair value |
| Non-current financial receivables | 2 | 194 | 194 | 188 | 188 |
| Non-current derivatives | 2 | 46 | 46 | 136 | 136 |
| Current derivatives | 2 | 49 | 49 | 116 | 116 |
| Total financial assets | 289 | 289 | 440 | 440 | |
| FINANCIAL LIABILITIES | |||||
| Non-current financial liabilities | 2, 3 | 1,372 | 1,372 | 1,322 | 1,322 |
| Non-current derivatives | 2 | 144 | 144 | 30 | 30 |
| Current financial liabilities | 2 | 702 | 702 | 224 | 224 |
| Current derivatives | 2 | 102 | 102 | 32 | 32 |
| Total financial liabilities | 2,320 | 2,320 | 1,608 | 1,608 | |
| FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE | |||||
| Amounts in NOK million | Level 1 | Level 2 | Level 3 | ||
| Financial instruments 31.12.2022 | -2,031 | - | -1,631 | -400 | |
| Financial instruments 31.12.2021 | -1,168 | - | -768 | -400 |
The financial instruments are measured based on observable spot exchange rates, the yield curves of the respective currencies as well as the currency basis spreads between the respective currencies.
| Amounts in NOK million | 31.12.2022 | 31.12.2021 |
|---|---|---|
| Share capital | 100 | 100 |
| Treasury shares | - | - |
| Share premium | 1,346 | 1,346 |
| Other paid-in capital | 881 | 822 |
| Translation effects | 208 | 98 |
| Hedging reserve (after tax) | -312 | 11 |
| Actuarial gains/Losses | 42 | 41 |
| Retained earnings | 2,129 | 1,804 |
| Group equity (controlling interests) | 4,394 | 4,222 |
As of 31 December 2022, the company held 434,553 treasury shares at an average cost of NOK 162.01.
| Amounts in NOK million | 31.12.2022 | 31.12.2021 |
|---|---|---|
| Non-current interest-bearing liabilities | 1,370 | 1,320 |
| Current interest-bearing liabilities including overdraft of cashpool | 702 | 224 |
| Non-current interest-bearing receivables (included in "Other Assets") | -2 | -3 |
| Cash and cash deposits | -234 | -124 |
| Net interest-bearing debt1 | 1,836 | 1,417 |
| - of which impact of IFRS 16 Leases | 371 | 371 |
The members of the Group Executive Management of Borregaard held a total of 588,700 stock options in the Company as of 31 December 2022.
No impairment indicators have been identified in the Borregaard Group's property, plant and equipment or intangible assets in the 4th quarter of 2022.
There have been no other events after the balance sheet date that would have had a material impact on the financial statements, or the assessments carried out.
In the discussion of the reported operating results, financial position and cash flows, Borregaard refers to certain measures which are not defined by generally accepted accounting principles (GAAP) such as IFRS. Borregaard management makes regular use of these Alternative Performance Measures and is of the opinion that this information, along with comparable
GAAP measures, is useful to investors who wish to evaluate the company's operating performance, ability to repay debt and capability to pursue new business opportunities. Such Alternative Performance Measures should not be viewed in isolation or as an alternative to the equivalent GAAP measure.
| MEASURE | DESCRIPTION | REASON FOR INCLUDING | ||
|---|---|---|---|---|
| EBITDA | EBITDA is defined by Borregaard as operat ing profit before depreciation, amortisation and other income and expenses. |
operating performance. | Shows performance regardless of capital structure, tax situation and adjusted for income and expenses related transactions and events not considered by management to be part of operating activities. Management believes the measure enables an evaluation of |
|
| EBITDA MARGIN | EBITDA margin is defined by Borregaard as EBITDA divided by operating revenues. |
Shows the operations' performance regardless of capital structure and tax situation as a ratio to operating revenue. |
||
| 1.10 - 31.12 | 1.1 - 31.12 | |||
| EBITDA | 2022 | 2021 | 2022 | 2021 |
| Operating profit | 228 | 156 | 1,186 | 952 |
| Other income and expenses | 20 | - | 8 | - |
| Amortisation intangible assets | 2 | 1 | 5 | 4 |
| Depreciation and impairment property, plant and equipment | 114 | 106 | 444 | 416 |
| EBITDA | 364 | 263 | 1,643 | 1,372 |
| 1.10 - 31.12 | 1.1 - 31.12 | |||
|---|---|---|---|---|
| EBITDA MARGIN | 2022 | 2021 | 2022 | 2021 |
| EBITDA | 364 | 263 | 1,643 | 1,372 |
| Operating revenues | 1,770 | 1,446 | 6,881 | 5,805 |
| EBITDA margin (%) (EBITDA/operating revenues) | 20.6 | 18.2 | 23.9 | 23.6 |
| MEASURE | DESCRIPTION | REASON FOR INCLUDING |
|---|---|---|
| EQUITY RATIO | Equity ratio is defined by Borregaard as equity (including non-controlling interests) divided by equity and liabilities. |
Equity ratio is an important measure in describing the capital structure. |
| EQUITY RATIO | 31.12.2022 31.12.2021 |
| Total equity | 4,445 | 4,306 |
|---|---|---|
| Equity & liabilities | 8,114 | 7,166 |
| Equity ratio (%) (total equity/equity & liabilities) | 54.8 | 60.1 |
| MEASURE | DESCRIPTION | REASON FOR INCLUDING |
|---|---|---|
| EXPANSION INVESTMENTS | Borregaard's investments are either cate gorised as replacement or expansion. Expan sion investments is defined by Borregaard as investments made in order to expand production capacity, produce new products or to improve the performance of existing products. Such investments include busi ness acquisitions, pilot plants, capitalised research and development costs and new distribution set-ups. In 2022, the expansion investments were mainly related to speciali sation projects within BioSolutions. |
Borregaard's strategic priorities are special isation and diversification, increase value added from the biorefinery, develop business areas and to continue emphasis on ESG along the entire value chain. To be able to deliver on those priorities, expansion investments are needed. As such, expansion investments are important information for investors. One of Borregaard's financial objectives is to have an internal rate of return >15% pre-tax for expan sion investments. |
| 1.10 - 31.12 | 1.1 - 31.12 | |||
|---|---|---|---|---|
| EXPANSION INVESTMENTS | 2022 | 2021 | 2022 | 2021 |
| Total investments including investment in associate company |
212 | 262 | 464 | 701 |
| Replacement investments | -172 | -190 | -359 | -398 |
| Expansion investments including investment in associate company | 40 | 72 | 105 | 303 |
| MEASURE | DESCRIPTION | REASON FOR INCLUDING |
|---|---|---|
| OTHER INCOME AND EXPENSES | Other income and expenses is defined by Borregaard as non-recurring items or items related to other periods or to a discontinued business or activity. These items are not viewed as reliable indicators of future earn ings based on the business areas' normal operations. These items will be included in the Group's operating profit. |
To be able to compare the EBITDA from year to year, significant non-recurring items not directly related to operating activities, are included in Other income and expenses. |
| 1.10 - 31.12 | 1.1 - 31.12 | |||
|---|---|---|---|---|
| OTHER INCOME & EXPENSES | 2022 | 2021 | 2022 | 2021 |
| Other income & expenses | -20 | - | -8 | - |
| MEASURE | DESCRIPTION | REASON FOR INCLUDING |
|---|---|---|
| NET INTEREST-BEARING DEBT | Net interest-bearing debt is defined by Bor regaard as interest-bearing liabilities minus interest-bearing assets. |
Net interest-bearing debt provides an indicator of the net indebtedness and an indicator of the overall strength of the statement of financial position. Net interest-bearing debt is part of Borregaard's financial covenants (leverage ratio) and is important in understanding the capital structure. |
| NET INTEREST-BEARING DEBT | 31.12.2022 | 31.12.2021 |
|---|---|---|
| Non-current interest-bearing liabilities | 1,370 | 1,320 |
| Current interest-bearing liabilities including overdraft of cashpool | 702 | 224 |
| Non-current interest-bearing receivables (included in "Other assets") | -2 | -3 |
| Cash and cash equivalents | -234 | -124 |
| Net interest-bearing debt | 1,836 | 1,417 |
| MEASURE | DESCRIPTION | REASON FOR INCLUDING |
|---|---|---|
| LEVERAGE RATIO | Leverage ratio is defined by Borregaard as net interest bearing debt divided by last twelve months' (LTM) EBITDA. |
Leverage ratio is an indicator of the overall strength of the statement of financial position. Borregaard has a targeted leverage ratio between 1.0 and 2.25 over time. Leverage ratio is one of Borregaard's financial covenants on long-term credit facilities. |
| LEVERAGE RATIO | 31.12.2022 | 31.12.2021 |
|---|---|---|
| Net interest-bearing debt | 1,836 | 1,417 |
| EBITDA | 1643 | 1,372 |
| Leverage ratio (net interest-bearing debt/EBITDA) | 1.12 | 1.03 |
| MEASURE | DESCRIPTION | REASON FOR INCLUDING |
|---|---|---|
| CAPITAL EMPLOYED | Capital employed is defined by Borregaard as the total of net working capital, intangible assets, property, plant and equipment, right of-use assets minus net pension liabilities. |
Borregaard uses capital employed as basis for calculating ROCE. |
| CAPITAL EMPLOYED (END OF YEAR) | 31.12.2022 | 31.12.2021 |
|---|---|---|
| Capital employed (end of year) | 6,802 | 6,043 |
| MEASURE | DESCRIPTION | REASON FOR INCLUDING |
|---|---|---|
| RETURN ON CAPITAL EMPLOYED (ROCE) |
Return on capital employed (ROCE) is defined by Borregaard as last twelve months' (LTM) capital contribution (operating profit before amortisation and other income and expenses) divided by average capital employed based on the ending balance of the last five quarters. |
ROCE is an important financial ratio to assess Borregaard's profitability and capital efficien cy. One of Borregaard's financial objectives is to have ROCE >15% pre-tax over a business cycle. |
| Average capital employed | 6,612 | 5,935 |
|---|---|---|
| Q4, 2022 | 6,802 | |
| Q3, 2022 | 7,015 | |
| Q2, 2022 | 6,779 | |
| Q1, 2022 | 6,421 | |
| Q4, 2021 | 6,043 | 6,043 |
| Q3, 2021 | 5,991 | |
| Q2, 2021 | 5,854 | |
| Q1, 2021 | 5,884 | |
| Q4, 2020 | 5,904 | |
| Capital employed end of: | ||
| RETURN ON CAPITAL EMPLOYED (ROCE) | 31.12.2022 | 31.12.2021 |
| EBITA | 31.12.2022 | 31.12.2021 |
|---|---|---|
| EBITDA | 1,643 | 1,372 |
| Depreciation and impairment property, plant and equipment | -444 | -416 |
| EBITA | 1,199 | 956 |
| RETURN ON CAPITAL EMPLOYED (ROCE) | 31.12.2022 | 31.12.2021 |
| EBITA | 1,199 | 956 |
| Average capital employed | 6,612 | 5,935 |
|---|---|---|
| Return on capital employed (ROCE) (%) (EBITA/average capital employed) | 18.1 | 16.1 |
Q4 2022 27
Borregaard ASA P.O. Box 162, NO-1701 Sarpsborg, Norway Telephone: (+47) 69 11 80 00 Fax: (+47) 69 11 87 70 E-mail: [email protected] www.borregaard.com
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